Posts Tagged ‘margin tax’

CARSON CITY – The Committee to Protect Nevada Jobs has filed a new lawsuit against a revised margin tax initiative petition sought by the Nevada State Education Association for violating a prohibition requiring such measures to focus on a single subject.

The teachers association filed the revised petition in August after Carson City District Judge James Wilson found the original measure seeking to levy a 2 percent tax on companies making gross revenues in excess of $1 million a year violated the single subject requirement for initiative petitions. The revised measure removed the provision found to violate the rule.

The new tax would generate an estimated $800 million a year for public education.

But Josh Hicks, the attorney representing the committee, said that the description of effect for the new initiative is still deceptive and though rewritten, continues to violate the single subject rule.

Even after removing several portions of the original Education Initiative that the court found violated Nevada Law, “the fact still remains that the union’s second attempt to pass a margin tax on Nevadans fails to mention that their petition does not guarantee that education spending will increase at all if the tax is enacted,” the committee said in announcing the new legal challenge.

The very real possibility exists that because of this petition, large-scale government spending could increase in other areas as a result of the revenue raised by this new tax, the committee said in the statement.

“Nevada law prohibits misleading voters about the purpose of an initiative petition,” Hicks said. “This new petition (in essence a second version) is solely designed to increase general tax revenues and general government spending by taking advantage of voters’ feelings about education in order to gain enough signatures to qualify and eventually pass a billion dollar plus tax increase.”

The teachers union said when the revised petition was filed that it was confident that it would withstand any legal challenge.

The teachers union is now collecting the signatures need to take the proposal to the Legislature in 2013. The group has until Nov. 13 to collect can collect 72,352 signatures to take the measure to lawmakers. The Legislature would then have 40 days to approve the proposal or it would go to the voters in 2014.

CARSON CITY – The Nevada State Education Association has re-filed its margin tax initiative petition with the Secretary of State’s office and will now begin collecting signatures in an effort to take the measure to the Legislature in 2013.

The revised petition removed a provision requiring taxpayer information to be posted publicly on the state Department of Taxation’s website after Judge James Wilson ruled Monday its inclusion violated a “single-subject” rule for such measures.

Photo courtesy of the National Archives and Records Administration via Wikimedia Commons.

Gary Peck, executive director of the association, said Monday that the group is confident the revised margin tax proposal will withstand any further legal challenges.

The new petition, filed Tuesday, seeks to levy a 2 percent tax on companies making gross revenues in excess of $1 million a year. The association was waiting until Wilson’s ruling before circulating petitions to gather the necessary signatures to take the measure to the Legislature next year, and then to the voters in 2014 if lawmakers failed to act.

The petition was challenged in court by the Committee to Protect Nevada Jobs, which argued it violated the single-subject rule. The committee also argued the 200 word description of effect of the proposal was inadequate.

Wilson ruled the description of effect was proper and rejected the committee’s arguments.

Other challenges to the singe-subject rule raised by the Committee to Protect Nevada Jobs were also rejected by Wilson.

Teachers are seeking the new tax to bring in as much as $800 million a year for public education.

The group has until Nov. 13 to collect can collect 72,352 signatures to take the measure to lawmakers. The Legislature would then have 40 days to approve the proposal or it would go to the voters in 2014.

CARSON CITY –A spokesman for the Nevada State Education Association said the group will re-file its margin tax initiative proposal by the end of the week after removing one section found in violation of petition rules today by a Carson City district judge.

Gary Peck, executive director of the association, said the provision requiring taxpayer information to be posted publicly on the state Department of Taxation’s website will be eliminated from the petition after Judge James Wilson today ruled its inclusion violated a “single-subject” rule for such measures.

Carson City District Judge James Wilson.

The petition will then be re-filed with the Secretary of State’s office and the signature collection effort will begin, he said.

“We are heartened by the judge’s ruling,” Peck said. “He threw out one provision in the entire initiative. We intend to remove that provision and re-file the initiative by the end of this week.

“We remain confident that, when the dust settles, the re-filed initiative will withstand any further legal challenges,” he said. “We will gather sufficient signatures to qualify it and the Legislature or the people of Nevada will enact the margins tax.”

The public understands the need for a stable, dedicated source of funding that will allow for adequate investments in, “our woefully underfunded K-12 system,” Peck said.

Josh Hicks, the attorney representing the Committee to Protect Nevada Jobs, said in a statement: “The committee will closely review any newly filed margin tax petition. If a new petition is still a massive tax increase on Nevadans disguised as an increase in education funding, the committee will file a new lawsuit.”

Wilson found fault with the existing petition because it proposed both the margin tax and a requirement for certain taxpayer information to be made public as part of the measure. He enjoined the Secretary of State’s office from submitting the petition to the Legislature in 2013 or to the general election ballot in 2014.

But the ruling does not preclude the re-filing of the initiative, minus the offending provision, by the teachers association.

The petition, filed in June, seeks to levy a 2 percent tax on companies making gross revenues in excess of $1 million a year. The association was waiting until Wilson’s ruling before circulating petitions to gather the necessary signatures to take the measure to the Legislature next year, and then to the voters if lawmakers failed to act.

The petition was challenged in court by the Committee to Protect Nevada Jobs, which argued it violated the single-subject rule. The committee also argued the 200 word description of effect of the proposal was inadequate.

Wilson ruled the description of effect was proper and rejected the committee’s arguments.

But because the petition also sought to have information identifying the companies paying the margin tax and the amount they paid published on a website by the Department of Taxation for the public to review, it improperly encompassed two subjects, he said.

“Imposing a tax to support Nevada schools and changing current tax law to make certain tax record information public are not functionally related and germane to each other in a way that provides sufficient notice of the general subject of, and the interests likely to be affect by, the proposed initiative,” Wilson said in his decision.

Other challenges to the singe-subject rule raised by the Committee to Protect Nevada Jobs were rejected by Wilson.

Teachers are seeking the new tax to bring in as much as $800 million a year for public education.

The group has until Nov. 13 to collect can collect 72,352 signatures to take the measure to lawmakers. The Legislature would then have 40 days to approve the proposal or it would go to the voters in 2014.

-

Audio clips:

Gary Peck, executive director of the teachers association says the initiative petition, with the one section removed, will be re-filed by Friday:

CARSON CITY – Carson City District Judge James Wilson heard arguments today but delayed ruling on whether an initiative petition filed by the state teachers association to raise an estimated $800 million a year for education via a new margin tax is too flawed to go forward.

Wilson said after a brief hearing that he will issue a decision “as soon as possible.”

Attorney Josh Hicks, representing the Committee to Protect Nevada Jobs, argued that the petition filed with the Secretary of State’s office by the Nevada State Education Association violated a rule for such measures requiring they deal with a single subject.

He also argued that the 200-word description of effect for the complex 26-page proposed margin tax on larger Nevada businesses was misleading. Nevada residents who would be asked to sign the petition to take the proposal to the Legislature in 2013 need to know what the measure would do, Hicks said.

Carson City District Judge James Wilson.

The description of effect does not, for example, include mention that the names of the businesses paying the tax, and the amount they would pay, would have to be published on a website by the Department of Taxation for the public to review, a change to current confidentiality statutes, he said.

This provision generated a number of questions from Wilson directed to James Penrose, the attorney defending the petition on behalf of the teachers association.

Hicks also argued that the proposal violates a constitutional requirement that it provide enough revenue to pay for its implementation. A fiscal note for the proposal indicates that not enough money has been identified to pay for the costs to the Tax Department to implement the new levy, he said.

Hicks questioned whether what the teachers association calls the “Education Initiative” is misleading because there is no guarantee that funding for public education would increase if it became law.

Penrose argued that the petition is straight forward, seeking to impose a new tax to raise money for public education. It would levy a 2 percent tax on companies making gross revenues in excess of $1 million a year. The money would be deposited in the Distributive School Account to fund public education, he said.

Penrose said the description of effect does not have to be perfect, but has to give those who might sign the petition a clear idea of its intent, which the proposal does.

Lynn Warne, president of the NSEA, said after the hearing that the group has yet to begin gathering signatures to qualify the measure to take to the Legislature. The group has until Nov. 13 to collect can collect 72,352 signatures to take the measure to lawmakers. The Legislature would then have 40 days to approve the proposal or it would go to the voters in 2014.

Warne said the association will wait until Wilson’s ruling to decide whether to begin collecting the needed signatures, even though any decision could be appealed to the Nevada Supreme Court.

If elements of the petition are rejected by Wilson, the petition can be revised and re-filed so that the signature gathering effort can begin, she said.

Gary Peck, executive director of the association, said the group expects its effort to be successful.

“I think it would be fair to say that we remain confident that, at the end of the day, the initiative will withstand a legal challenge,” he said. “We remain confident that it will qualify because the residents of the state of Nevada understand how inadequate the funding for K-12 education is, and they will be persuaded that this is a way to fix the problem.”

Hicks said he could not predict what Wilson’s ruling will say.

“The judge gave it a full, fair hearing and that’s all anyone can ask for,” he said.

-

Audio clip:

Gary Peck, executive director of the teachers association, says the effort to impose the tax will be successful and supported by Nevada residents:

CARSON CITY – The Committee to Protect Nevada Jobs filed a lawsuit today against the “Education Initiative” (margin tax Initiative) charging that that the petition’s description of effect is deceptive and incomplete and that it violates the single-subject rule.

The complaint was filed in Carson City District Court.

“From the title on down, the initiative is deeply flawed and misleading,” said Josh Hicks, of Brownstein Hyatt Farber Schreck, the attorney for the Committee to Protect Nevada Jobs. “The initiative has nothing to do with education and includes many aspects that are not mentioned in the initiative’s description. We believe that as written, this initiative violates Nevada law.”

The complaint notes that the 26-page “Education Initiative” mentions education only once in its description of effect and that it makes no provision for requiring that education funding be increased over current levels by “even a penny.”

The complaint also notes that the petition’s terms allow for a decrease in classroom funding, which would be an “unpleasant surprise” to Nevadans who sign it.

The Nevada State Education Association filed its petition with Secretary of State Ross Miller on June 6. It would levy a 2 percent tax on companies making gross revenues in excess of $1 million a year.

NSEA President Lynn Warne said at the time the tax would bring in an estimated $800 million a year from large Nevada corporations. She also said the petition is expected to withstand any legal scrutiny.

NSEA President Lynn Warne answered questions about the margin tax proposal when it was filed June 6. / Photo: Nevada News Bureau.

Hicks said the initiative imposes a margin tax on businesses and increases the size of the Nevada Department of Taxation, a multi-million dollar government agency, to administer and audit the new tax.

“The petition’s title and description of effect will confuse Nevada voters and mislead them into signing a petition that does not do what it purports to do and that does do many things that are hidden from view,” he said.

As an example, Hicks noted that the description of effect makes no mention that taxpayer information will be posted on the internet in clear violation of taxpayer privacy rights guaranteed by Nevada law since 1979. In addition, the complaint notes that the description does not mention that even unprofitable and failing businesses that are losing money will still be subject to the tax and that “an increased taxation on failing businesses is certainly not going to improve the unemployment rate.”

“Quite clearly, this initiative is designed solely to increase general tax revenues and to take advantage of citizen’s concerns about education in order to mislead them into signing the petition and, later, into voting for it,” Hicks said. “Nevada law is quite clear in prohibiting such deceptions.”

The “Education Initiative” outlining how the 2 percent tax on companies making more than $1 million in gross revenues should more properly be called the “Margin Tax Initiative”, the association said in an email today. The $800 million a year in revenue estimated to be raised from the proposed tax is not directed specifically to public education, the NTA said.

The money would go to the state general fund instead.

But that is just the beginning of the litany of concerns identified by the NTA.

Photo courtesy of the National Archives and Records Administration via Wikimedia Commons.

“Proponents claim the $1 million exemption protects small businesses,” the NTA said in its assessment of the proposal. “Not true. The calculation of total revenue pursuant to the provisions of the initiative will put the income of many small businesses over $1 million. Those small businesses will include many franchise operators with a single location, most independently owned gas stations, many medical clinics, ranches and farms and a host of other businesses. In reality it is only the tiny business that will not be captured.”

The concerns are coming forward just as a poll is showing support for the proposal by a nearly 2-to-1 margin among those voters queried. The results of the poll, conducted at the end of May, were reported today by Las Vegas Sun columnist Jon Ralston.

Carole Vilardo, president of the NTA, said the association will be reporting even more concerns as businesses begin to analyze the consequences of the tax should it become law. Its first briefing on the proposed tax was issued earlier this month.

The proposal sounds good to voters because it is a tax on business and not on their own pocketbooks, she said.

Tax proponents only want more revenue and they, “don’t care squat about how you get it,” Vilardo said. “They don’t care if it works or not.”

The taxation proposal is modeled on the Texas margin tax and relies also on Assembly Bill 582 of the 2011 session of the Nevada Legislature, which Vilardo said was never fully vetted by lawmakers.

Nevada businesses are already struggling, and face increased fees and future unemployment insurance tax hikes to repay the money borrowed from the federal government to pay unemployment benefits, she said.

The petition was filed with the Secretary of State’s office on June 6 by the Nevada State Education Association with the support of the Nevada State AFL-CIO.

If the groups can collect 72,352 signatures by Nov. 13 it will go to the 2013 Legislature for review. If the Legislature does not approve the proposal it will go to voters in 2014.

Lynn Warne, president of the NSEA, said when the petition was filed that the intent is to provide more funding for K-12 education.

“We believe that they (voters) are looking for a fair, broad-based tax but they are looking for funding for schools, for kids, to make sure Nevada moves off the bottom in per pupil expenditures,” she said.

The NTA also notes that the tax is not based on the ability to pay.

“As a result many small businesses will find their profits wiped out,” the assessment said. “For any businesses hurt by this economy and struggling to keep their doors open, this tax may prove to be the proverbial straw that broke the camel’s back.”

The Texas margin tax also created increases in the cost of compliance for businesses, the NTA said.

“Nevada businesses will face these same increases in addition to paying the tax at a much higher rate,” the NTA said. “This tax is a full employment bill for accountants and tax attorneys.”

Warne said she fully expects a legal challenge to be filed opposing the petition in an effort to derail the signature collection effort.

-

Audio clips:

NTA President Carole Vilardo says the tax proposal appeals to voters because it does not affect them directly:

CARSON CITY – A business margin tax initiative petition filed with the Secretary of State’s office won’t see signature gathering efforts start right away because a legal challenge to the proposal is expected, a teachers union official said today.

But Lynn Warne, president of the Nevada State Education Association, who filed the petition to establish the tax that would bring in $800 million a year from large Nevada corporations, said it is expected to withstand any legal scrutiny. The language has been vetted by several attorneys, including association attorney James Penrose, she said.

“We usually go through about a month looking for any kind of legal challenges,” Warne said. “We expect that there will be some coming.”

Even with delays due to legal efforts to derail the proposal, there will be no difficulty in collecting more than enough signatures from registered voters by November to put the proposal to the Legislature in 2013, she said. The Legislature has 40 days to approve the proposal or it goes to the voters in 2014.

Called the “Education Initiative”, the actual language implementing the 2 percent tax on companies making gross revenues in excess of $1 million a year is 32 pages long.

Penrose said the mining industry would be required to pay the tax the same as other businesses. The gaming industry would pay the tax on non-gaming revenue, such as hotel operations.

Warne said a number of groups have expressed interest in joining with the teachers and the AFL-CIO in supporting the measure, which she said will created a broad-based business tax that will ensure public education won’t face further cuts to programs or require teacher layoffs.

While complex, Warne said she expects voters will support the margin tax proposal in 2014 should the Legislature fail to act.

“We believe that they (voters) are looking for a fair, broad-based tax but they are looking for funding for schools, for kids, to make sure Nevada moves off the bottom in per pupil expenditures,” she said.

If the tax proposal is approved by the Legislature in 2013, the liability would begin in 2014 with the first collection due in January 2015. If approved by voters in November 2014, the liability would begin in 2015 with the first collection due in January 2016.

Warne said the proposal relies on the Texas margin tax, and Assembly Bill 582 of the 2011 Nevada legislative session, for its implementation.

If implemented, the tax revenue would flow to the state general fund and not be earmarked for public education, but Warne said the revenue pie would expand and provide more money for the public schools.

“The Legislature will fund education as they deem appropriate,” she said. “There will just be more revenue for them to be able to appropriate to education. We hope they do so properly.”

While the language has just now been filed explaining how the tax would be levied, the proposal has already come in for criticism from a number of sources.

Las Vegas businessman Monte Miller, who earlier this year proposed petitions to raise both the gaming and mining tax, called the margin tax a “destructive, terribly complex tax.” Miller had filed his proposals as a way to offer voters alternatives to a margin tax, which he anticipated would be sought by teachers, He dropped his efforts in April.

The Nevada Policy Research Institute has also criticized the tax. Geoffrey Lawrence, deputy policy director at NPRI, said in a statement issued Tuesday that a margins tax would be a “disaster” for Nevadans.

-

Audio clips:

NSEA President Lynn Warne says she believes voters will support the tax if asked to do so:

CARSON CITY – A conservative Nevada think tank today published a guide for policymakers and the public on issues ranging from the state spending to public education to tax policy.

The 88-page sourcebook, called “Solutions 2013” is a compilation of research and policy recommendations from the Nevada Policy Research Institute addressing 39 different subject areas.

The publication comes 11 months before the Nevada Legislature will convene in 2013 to consider a host of critical issues, and just as the 2012 election season gets officially under way with candidate filing set to begin Monday.

“This collection dispels many popular misconceptions about Nevada, while highlighting new approaches to policy making,” said NPRI President Andy Matthews in an introduction to the guide. “My hope is that, regardless of where your political sympathies may lie, you will consider these ideas on their merits.”

Geoffrey Lawrence, NPRI’s deputy policy director, said even those who disagree with the recommendations can use the data cited in the guide.

“I think this is valuable for everyone who is interested in public policy regardless of their particular political persuasions because there is a lot of objective data in there that you can draw your own conclusions from if you like,” he said. “I think one of the other values of it is that you can see that our conclusions are drawn straight from these objective data sources so they are not just things that we’re coming up with out of thin air.”

The organization weighs in on the potential of a Texas-style margin tax being imposed on Nevada businesses, which it says should be rejected. A coalition of education and labor groups is contemplating putting such a revenue generator on the state ballot, but no such proposal has been filed yet with the Secretary of State’s office.

“The business margin tax is a hybrid, combining negative features of both corporate‐income and gross‐receipts taxes,” the policy guide says. It quotes the Tax Foundation as saying, “the Texas ‘margin’ tax is really a badly designed corporate income tax.”

The NPRI guide says a margin tax would create a tax liability even for businesses that operate at a financial loss, meaning the tax also possesses the negative attributes of gross receipts taxation.

The organization also takes up the issue of a state-run lottery, an idea that gets attention from lawmakers virtually every legislative session. NPRI notes that such lotteries do not generate a lot of revenue and are not stable sources of income.

California lottery ticket. / Photo: Bdviets via Wikimedia Commons.

“As Price Waterhouse – the Nevada Legislature’s own tax consultant – has concluded, ‘A state‐run lottery fails every test of a “good” tax policy. In Nevada, gaming should be left to the private sector,’ ” the guide says.

NPRI weighs in on the issue of what, if anything, should be done about the current public employee retirement system. Gov. Brian Sandoval and some lawmakers have called for a change to the plan to make it a 401(k)-style defined contribution plan instead of the current “defined benefit” plan so that concerns of the potential long-term liabilities of the retirement plan can be addressed.

NPRI argues for a hybrid plan as adopted by the Utah Legislature to avoid the high upfront costs associated with a wholesale change to a defined contribution plan.

“Utah’s system was put in place with the enactment of Senate Bill 63 from Utah’s 2010 General Legislative Session, which should serve as a model to guide Nevadans,” the policy guide says.

-

Audio clips:

Geoffrey Lawrence of NPRI says the Texas-style margin tax is a bad idea:

CARSON CITY – Long-time political consultant and former state lawmaker Pete Ernaut said today that efforts to use the ballot box to set tax policy could handcuff the ability of the governor and Legislature to make critical decisions on the future of the state.

“It should be warning to everybody because this is something that could very rapidly turn into the next iteration of the California ballot, where we have 10, 12, 13 ballot measures on a number of issues and you wake up one day and really you’ve taken the power away from the Legislature or the governor to make any decisions,” he said.

Political consultant Pete Ernaut.

“And that’s really what they’re struggling with in California more than anything else is you have this entire apparatus in the California state Legislature that essentially has the ability to make decisions on about 5 percent or 6 percent of the entire California budget,” Ernaut said in an interview on the Nevada NewsMakers television show. “If we’re not careful, that’s the way that it will go.”

Ernaut’s comments were in response to a question about the possibility of several tax proposals qualifying for the state ballot in the next few election cycles. Ernaut is president of government and public affairs with R&R Partners.

Las Vegas businessman Monte Miller is pursing two initiative petitions, one to raise the gaming tax rate on the state’s largest casinos, and another to amend the state constitution to permit the tax rate on the mining industry to be increased.

Miller said he is pursing the tax proposals to ensure there are some options on the table for policy makers if state labor and education leaders move forward with a Texas-style margin tax on business to increase funding for education. No such petition has been filed yet with the Nevada Secretary of State’s office.

Ernaut acknowledged that there is an undercurrent of frustration regarding Nevada’s current tax policy, with gaming and mining questioning the fairness and balance of the system, and some in the business community in turn concerned they are being pressured by the gaming and mining industries.

Nevada’s improving economy could help defuse the intensity of the tax debate and allow for a more measured, methodical and thoughtful discussion of what the state’s tax structure should look like down the road, “rather than with a pistol to somebody’s forehead, which is what it seems like it’s been,” he said.

Gov. Brian Sandoval also spoke out recently in opposition to the tax-related ballot measures, saying those discussions belong in the Legislature.

“I believe initiative petitions are a poor way to set tax policy,” Sandoval said.

But Danny Thompson, executive secretary-treasurer of the Nevada State AFL-CIO, who first mentioned the possibility of a business tax ballot proposal in November 2011, said at the time it is the Legislature’s inability to make tax decisions that has generated the interest in going directly to the voters instead.

Nevada has a two-thirds vote requirement in the Legislature to increase taxes or fees.

“We are looking seriously at this process because the legislative process is an impossible one,” he said. “With the two-thirds requirement in the constitution, what in effect that does – it has the minority control the majority wishes. You cannot solve the problem at the Legislature alone without some help from the people.”